Fed commits to future interest rate hikes

Fed reporter Jennifer Schonberger breaks down the Fed's interest rate hike forecast amid emerging inflation and CPI data.

Video Transcript

SEANA SMITH: I mentioned the minutes from the Fed meeting. That's the big driver here in this afternoon's trading. Yahoo Finance's Jen Schonberger has the latest on that. Hey, Jen.

JENNIFER SCHONBERGER: Good afternoon, Seana. Many Fed officials felt that the cost of doing too little to cool inflation versus the cost of doing-- outweighed the cost of doing too much, according to internal policy deliberations amongst Fed officials at their meeting three weeks ago. Now, several participants felt the need to maintain a restrictive stance for as long as necessary, with a couple stressing that historical experience showed the danger of prematurely ending periods of tight monetary policy.

Now, at the time, Fed officials thought that inflation remained unacceptably high, noting that inflation data had come in above expectations and was declining more slowly than anticipated. Several participants pointed to continued elevated rates of the increase in core goods prices. That is prices excluding those volatile food and energy prices. Now, most Fed officials feel that some interest rate sensitive sectors like housing and business fixed investment have started to respond to rate hikes, but that a large portion of sectors in the economy have yet to.

Now, as monetary policy tightens further, officials think that they can slow the pace of rate hikes at some point and assess the impact of those rate hikes that have already been implemented on inflation. Many officials felt that once the policy rate had reached a sufficiently restrictive level, they would maintain that level for, quote, "some time" until there was, quote, "compelling evidence" that inflation was on course to return to that 2% objective.

Now, many officials expect the economy to grow at a pace below trend this year and for the next couple of years, as they expect these interest rate hikes to filter through the economy. Guys.

RACHELLE AKUFFO: All right, thanks for that update. Jen Schonberger reporting there.